Manufacture test for cut tobacco favoured the assessee, with stay granted unconditionally on a prima facie basis.

Cutting unmanufactured tobacco into smaller, non-uniform pieces was examined as to whether it amounted to manufacture for purposes of duty and penalties. The Revenue argued that a process making the product marketable satisfied Chapter Note 2 of Chapter 24, while the applicants relied on the view that powdering or crushing unmanufactured tobacco does not itself constitute manufacture. The record notes a prima facie acceptance of the applicants' contention, and the challenge to penalties proceeded on the same basis. The stay petitions were allowed unconditionally.

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Issues: Whether the chopping of unmanufactured tobacco into smaller pieces amounted to manufacture so as to justify pre-deposit of duty and penalties.

Analysis: The dispute concerned whether the process of cutting tobacco leaves by chopper into powder or granules, resulting in non-uniform pieces, constituted manufacture. The Revenue relied on Chapter Note 2 of Chapter 24 to contend that a process rendering the product marketable would amount to manufacture. The applicants relied on the view that powdering or crushing unmanufactured tobacco does not amount to manufacture, and the order records a prima facie acceptance of that contention. The plea against penalties was also advanced on the same basis.

Conclusion: The issue was prima facie answered in favour of the applicants, and the stay petitions were allowed unconditionally.

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